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Use Medicare Advantage to Pave the Way for Value-Based Care

Medicare is often seen as the old gray mare of health insurance — outdated and slow-moving. Yet a part of it, Medicare Advantage, could play a key role in health care’s future, especially as Republicans, who traditionally have been more supportive of the program, look for their own ways to transform health care and move it further in the direction of value-based care.

Since the turn of this century, there has been bipartisan consensus that it makes little fiscal or health sense to pay physicians and other providers just for doing more — more tests, more procedures, and more services. Instead, we should be paying for value, and pay health care providers for delivering better health outcomes at a better cost.

That concept was recently enshrined in the Medicare Access and CHIP Reauthorization Act of 2015, which takes significant steps to move more physicians to value-based payment arrangements. It overwhelmingly passed in the Senate, 92–8, and in the House, 392–37.

What many people don’t realize is that Medicare has been an innovator in value-based care for decades. Medicare beneficiaries have had alternative options to the traditional fee-for-service care model since the 1970s. Under these options, the government pays private insurance companies a risk-adjusted, prospective health premium to provide Medicare-type coverage for each Medicare beneficiary. These options became formalized at the turn of the century and are now known as Medicare Advantage.

This program is attracting more attention of late and has become a popular policy tool among Republicans. House Speaker Paul Ryan’s A Better Way, for instance, calls for immediate reinvestments into Medicare Advantage and recommends the repeal of current benchmark caps.

Politics aside, this emphasis on Medicare Advantage is a promising development. The program gets a lot right when it comes to making value-based care work. As a Medicare Advantage provider treating more than 30,000 low-income seniors, my company, ChenMed, is able to provide greater benefits and better health outcomes to our patients.

With Medicare Advantage, we can deliver the type of important preventive care and chronic care management that was once reserved for wealthy individuals who can afford concierge medicine, at far lower premiums and out-of-pocket costs. For instance, at our 39 centers across nine U.S. markets, ChenMed physicians spend 168 minutes per year face-to-face with each patient, compared to the national average of just 13 to 16 minutes. As a result, our patients average 38 percent fewer days in the hospital than the national average.

We are able to do this because Medicare Advantage is structured in a way that makes value-based care work. Payments for each beneficiary are risk-adjusted, meaning that Medicare Advantage provides higher payments for sicker patients. This removes the incentive for health plans and physicians to select healthier patients and skimp on medical care.

Health plans and doctors are accountable for the total cost of care. That means ChenMed and other Medicare Advantage programs need to be as concerned about the health of our patients outside the walls of our examination rooms as inside of them.

All savings that doctors generate immediately go back to the provider. In addition, there is no lag time in payments; they are made upfront. This lets doctors immediately invest in practice changes and technology that can lower costs and boost outcomes, establishing a virtuous cycle of savings and investment. In contrast, the Medicare Shared Savings Program calculates and pays savings after they have been created, forcing providers to float the cost of care while waiting for payment, which can be as long as two years.

Medicare Advantage could certainly be expanded based on this solid foundation. But if it is to take a more central role in health reform, Congress and the Trump administration should not just accept it as is. Three key improvements would be needed.

First, Congress should repeal the current benchmark caps. These perversely cap payments so a high-quality five-star health plan is paid the same as an otherwise similar three-star health plan. The Centers for Medicare and Medicaid Services should then increase the premium bonuses for high quality that Medicare Advantage plans can receive. These are already a powerful additional incentive to health plans and their providers, but increasing them will more quickly drive quality.

Second, we need to make it easier for all seniors on Medicare Advantage to access care. Right now, ChenMed and other providers can’t waive co-pays even though that would remove a financial obstacle and result in better care and better health outcomes. That’s why providers who take on the full risk of a patient’s care should be exempt from anti-kickback rules so they can waive financial co-pays for all patients.

Third, policymakers need to monitor carefully the consolidation going on in the health care industry. Competition among Medicare Advantage plans directly benefits patients because robust competition leads to better benefits and amenities offered (along with the fact that plans do not compete on price). If a market is dominated by one payer, then a quick race to the bottom could quickly occur.

If these changes are made, Medicare Advantage could be a powerful force galvanizing the transformation of our health care system to one based on value. That’s a goal that transcends politics and delivers for patients.